Feedyard breakevens rise with cost of gain and calf prices

Cattle feeders have cause for optimism as they watch fed-cattle prices climb into the $70s, with prospects for continued strong prices into next year. Their production costs, however, also have taken an upward turn, driving up the selling prices they'll need to see profits next spring on fall-placed cattle.

Grain prices have increased somewhat over the past two months in response to strong demand projections and lower supply estimates. In the November crops report, the U.S. Department of Agriculture reduced its estimate of the 2000 U.S. corn harvest to 10.054 bushels, compared with an August estimate of 10.369 bushels.

The crop remains one of the largest on record, but projections for domestic use and export demand suggest it was just big enough. USDA projects that corn use for all purposes will reach a record 10.1 billion bushels for the current marketing year. Corn exports, USDA predicts, will increase 17.6 percent over last year, with Japan and Korea expected to purchase large quantities. Grain prices will remain low compared with historical averages, but could run somewhat higher than last year.

Rodney Jones, Extension Livestock Production Economist at Kansas State University, notes that as feed prices and feeder cattle prices have risen, performance is likely to decline through the winter months. He expects feed conversions for fall placements to run about 13 percent worse, and average daily gains to be about 11 percent lower than those for spring placements.

Based on cattle finishing budgets for 750-pound steers and 650-pound heifers, the expected break-even prices for October placements scheduled to finish in March are about $74.25 per hundredweight.

Feedyards placed large numbers of lightweight cattle this fall, and Dr. Jones says the finishing budget for a 550-pound calf started in October and scheduled to finish in late May or June projects a breakeven around $72.50 per hundredweight.

Based on fall performance estimates, Dr. Jones says each $0.10 per bushel change in corn price changes feeding cost of gain by $1.36 per hundredweight. Each $10.00 per ton change in hay prices changes feeding cost of gain by $0.54 per hundredweight. Feeding cost of gain changes by $0.56 per hundredweight for each 0.10 pound change in feed conversions and $0.08 per hundredweight for each 0.10 pound change in daily gains.